Gold is an asset; and for every person, gold can prove to be a great financial enabler because of the availability of easy and inexpensive gold loans. Getting cash for gold is convenient, hassle-free, and one of the well-established methods of taking loans. You can sell gold for cash, but if you could repay and get back your gold, that is more suitable.

Cash for gold, particularly if you’re borrowing from a credible service provider, is one of the best solutions to your loan needs. 

What are the precautions that you must be aware of? We discuss it in detail.

Tips To Avail of a Gold Loan

Ownership – In the case of most gold loans, you need to be able to prove its ownership. The purchase receipt usually establishes the ownership. However, a receipt is not available always. In such cases, it ultimately depends on the assessment by the disbursing officer. The bank or NBFC does not want to be a part of a dispute over heirlooms, and thus, the jewellery purchased reasonably recently and with proper certificates is better.

Purity – The amount that can be given as a loan will vary, depending on the market price of gold. You need to remember that the rate varies daily. The weight of stones, no matter how expensive, will be deducted. 

Tenure – Gold loans have extremely short tenures. Most NBFCs give gold loans for a few months. Some banks offer one-year loans. At most, 70-80% of the gold value is granted as a loan. 

Interest – Since it is a secured loan, the interest is low. It usually ranges from 11-14%. It is always positioned about 2-3% less than the cost of a personal loan prevailing in the market.

Ability to repay – A loan against gold is a reliable source of funding for an emergency, and those who avail of such loans are usually small businessmen and salaried individuals.

If you have an existing relationship with the lending bank/NBFC, then it becomes quicker to get the loan approval. An approving officer from the bank generally considers the ability of the borrower to pay back the loan amount before approving the loan.

Ceiling – The maximum amount that well-known banks/NBFCs lend out can vary a lot. The general upper and lower limit varies between Rs 10,000 to Rs 15 lakhs. Of course, this can vary significantly from bank to bank.

Insurance – The value of gold that has been deposited is insured to the full extent. It is usually stored in a strong-room of the lending premises. The chances of theft are no more or less than keeping the gold in a locker. It also proves to be a motivating factor for many loan seekers to use their gold for the loan.

Prepayment penalty – Like all loans, a gold loan carries a prepayment penalty. If you return the due amount earlier than usual, the lender deducts a small amount to make up for the foreclosure. However, when you fill out the application for the gold loan, you are made well aware of all the terms, such as prepayment penalties, late payment charges, etc. These charges are kept very nominal. 


The primary attraction of a loan against gold is the ease with which you can avail of it. Instead of trying to sell gold for cash, a gold loan the best way to bolster your finances at tough times. Not only does it give you the means to leverage your gold to manage your financial requirements, but also ensures that you can eventually get back the assets by repaying at a later stage, at a nominal rate of interest.